On 21 May 2026 the Chancellor announced that the Approved Mileage Allowance Payment for cars and vans rises from 45p to 55p per mile for the first 10,000 business miles in a tax year. The change is backdated to 6 April 2026, so it applies to the whole 2026/27 tax year.
This is the first increase in 15 years. The 45p rate was set in 2011, before three governments, two general elections and a doubling of fuel prices. If you reimburse employees for business mileage, or claim it yourself as a sole trader, there are several things you should do this month, and one technical trap that catches most people.
In a nutshell
- The new rate is 55p for the first 10,000 miles, 25p above. Other vehicle rates are unchanged.
- Employers should top up April and May reimbursements. HMRC is allowing the backdated catch up without tax or NIC consequences.
- The NIC threshold is still 45p. Tax-free at 55p, NIC-free at 45p, until legislation catches up.
- Sole traders using simplified expenses just claim 55p. Update your mileage log from 6 April 2026 and apply the new rate on the 2026/27 Self Assessment.
- Employees paid below 55p can claim the difference. Through Mileage Allowance Relief on Self Assessment or form P87.
- AMAP is not the same as AFR. Advisory Fuel Rates for company car drivers are a different scheme and did not change.
1. The new AMAP rates at a glance
From 6 April 2026 the official Approved Mileage Allowance Payment rates are:
- Cars and vans: 55p per mile for the first 10,000 business miles, 25p per mile after that
- Motorcycles: 24p per mile (unchanged)
- Bicycles: 20p per mile (unchanged)
- Passenger payment: 5p per mile for each passenger making the same business trip (unchanged)
Only the headline car and van rate moved. The 10,000 mile threshold still resets at the start of each tax year, and it applies per individual, not per vehicle.
2. What employers need to do this month
Because the announcement came on 21 May with a 6 April backdated start, every employer has reimbursed April and early May mileage at the old 45p rate. HMRC has confirmed it will operate informally until the legislation updates, which means employers can pay the 10p per mile shortfall now without triggering tax or NIC consequences for the employee.
Three concrete actions this month:
- Run a report of business mileage reimbursed since 6 April 2026.
- Pay the 10p per mile top up for the first 10,000 miles, ideally through the next payroll run.
- Update your expense policy, payroll software and any mileage capture app (Concur, Pleo, Expensify, Xero Expenses) to use 55p going forward.
If you use a third party expense system, check that the supplier has pushed the rate update. Several have, but a handful require you to change it manually.
3. The NIC threshold trap is still 45p
This is the bit most write ups miss. The new 55p is the tax free approved rate. The National Insurance approved rate is set in separate regulations that have not yet been amended. For now it remains at 45p.
In practice this means employers can reimburse 55p per mile with no tax and no NIC consequences, because HMRC has confirmed it will not enforce the 10p NIC gap during the transitional period. The legislation will catch up in due course. But if you are very risk averse, or you operate a salary sacrifice or cash for car arrangement that relies on precise NIC mechanics, ask your accountant to review.
4. Sole traders using simplified expenses
If you claim motor expenses on your Self Assessment using the simplified expenses flat rate method, the new rate of 55p per mile for the first 10,000 miles applies for the whole 2026/27 tax year. Nothing changes in how you claim, just the number you multiply by.
If your accounting year end is not aligned with the tax year, which is rare after basis period reform but possible, apportion: use 45p for any business miles falling in the 2025/26 portion of your accounts, and 55p for the 2026/27 portion.
Two reminders that always catch people out:
- Once you choose simplified mileage for a vehicle, you must stick with it for as long as you own that vehicle. You cannot switch to claiming actual costs in a later year.
- You cannot also claim capital allowances on the same vehicle. The 55p is meant to cover fuel, maintenance, insurance, depreciation and everything else.
5. Mileage Allowance Relief for employees paid below 55p
If your employer reimburses business miles at less than 55p, you can claim Mileage Allowance Relief on the difference. This is tax relief, not extra cash from the employer, so the benefit depends on your marginal rate.
For 2026/27 the claim works like this: take 55p multiplied by your business miles in the year up to 10,000, plus 25p multiplied by any miles above, subtract what your employer actually reimbursed, and claim the balance through your Self Assessment return or a P87 form.
A basic rate taxpayer gets 20p back per £1 of relief. A higher rate taxpayer gets 40p. Worth doing if you drive serious mileage and your employer is sitting on the old 45p rate.
6. AMAP is not the same as AFR
A common confusion: AMAP (the rate that just rose to 55p) applies when you use your own car for business travel. Advisory Fuel Rates apply when you drive a company car and your employer reimburses fuel for business mileage.
AFR rates are published quarterly by HMRC based on actual fuel prices. From 1 June 2026 they range from 7p per mile (electric, home charged) up to 26p per mile (petrol over 2,000cc), depending on engine size and fuel type. The 21 May AMAP announcement did not change AFR. If you drive a company car, your scheme has not changed.
A worked example: Tom, a sole trader electrician
Tom drives his own van for business and does roughly 12,000 business miles a year. Under simplified expenses, his 2026/27 claim is:
- First 10,000 miles at 55p = £5,500
- Next 2,000 miles at 25p = £500
- Total motor expenses claim: £6,000
Under the old rates the same mileage would have produced £5,000. So Tom's claim is £1,000 higher this year for exactly the same driving, which at the basic rate (20% Income Tax plus 6% Class 4 NIC) saves him £260 in tax.
Things to watch out for
- Keep a contemporaneous mileage log. HMRC can request evidence of business mileage going back four years. Date, postcode of start and end, purpose of trip.
- Personal use is not claimable. Commuting from home to your usual workplace is personal, not business.
- Electric vehicles use the same AMAP rates. There is no separate "EV mileage rate" under AMAP. The 55p applies to electric cars and vans too.
- Limited company directors driving their own car follow AMAP, not AFR. Same 55p rate, claimed through the company as an expense and reimbursed personally.
- Above 10,000 miles is still 25p. The increase only affects the lower tier. High mileage drivers gain the same maximum top up of £1,000 a year as Tom in the example.
How Ollen Services Can Help
If you are a sole trader, we will make sure your 2026/27 Self Assessment claims mileage at the right rate, with the right method, and that your records would survive an HMRC enquiry. If you are an employer, we can review your expense policy, calculate the backdated top up for your team, and brief your payroll provider so the 55p flows through correctly from the next pay run.
For limited company directors reimbursing themselves for business mileage in a personal vehicle, we will also check that the expense is properly recorded, paid through the right account and not accidentally creating a benefit in kind.
Call us on 07513 491 259 or email hello@ollenservices.co.uk. The 10p per mile uplift is real money for any business that drives, and getting the mechanics right protects both the saving and your records.